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In the first half of 2021, the UK lost £753.9 million to fraud, an increase of 30 percent compared to H1 2020, according to the most recent report by UK Finance. The report also revealed that banks using more advanced security systems were able to prevent an additional £736 million from being stolen.

Fraud is a billion-dollar global industry keeping the world in a perpetual state of alarm. Digital banking, remote working and COVID-19 have all acted as catalysts for the surge in fraud worldwide.

According to a survey executed in early 2021 by fraud monitoring agency ACFE, approximately 4 out of 5 banks saw an increase in payments fraud last year. In the same survey, 9 out of 10 respondents said that they expect to see fraud grow in the next 12 months. And the situation will only worsen if left unchecked.

It was already challenging when payments fraud happened on a national scale and could be tracked to perpetrators within a country’s physical borders. But real-time, cross-border payments and international fund transfer services have made it even more difficult for banks and regulators to track and record fraud. According to KPMG’s 2019 Banking Fraud Survey, the majority of respondents recovered less than 25 percent of their losses to fraud.

The nature of payments fraud is constantly evolving

Last year, Western Union sent refund checks worth about $300 million to 1,420,000 people in the U.S. and other countries as part of a settlement with the FTC and the Department of Justice. These payments were made to individuals who fell victim to cross-border scams perpetrated by international fraudsters exploiting the Western Union money transfer system.

These acts occur in many different forms, including lottery, sweepstakes, employment and romance scams. Another common method of fraud is when the scammer impersonates a loved one in immediate need of money from a spoofed email or phone number with a dangerous URL.

Much like real-time payments, authorized push payments (APP) are another channel fraudsters are exploiting at an alarming scale. Criminals use tactics like scam emails, fake websites, scam phone calls and text messages to trick people into sharing their personal and banking details, passwords, etc. Fraudsters use these details in a targeted way to either steal money or commit other criminal acts by authorizing payments without the victim’s knowledge.

UK Finance reports that around £355.3 million was lost to APP scams — a 71 percent increase compared to the same period in 2020. In addition, for the first time this year, losses from APP fraud surpassed the value stolen through card fraud, underlining a huge concern for banks, merchants and consumers.

Consumers are certainly spending more online, giving fraudsters the opportunity to take advantage. As per the UK Finance Report, 70 percent of APP fraud happened on online platforms, indicating the growing threat of fraud in eCommerce.

In fact, a report by TransUnion analyzing global fraud during the second quarter of 2021, states that in comparison to 2020, fraud in the gaming and travel and leisure industries increased by 393 percent and 155.9 percent, respectively, across the globe over the last year. In the U.S., the gaming industry saw a rise of 261.9 percent, while the travel and leisure sectors saw a 136.6 percent rise in fraud.

Protecting consumers and brand with real-time fraud management

Real-time fraud management can help protect customers, merchants and banks from numerous potential risks and the huge costs of fraud. It can protect customers anytime, anywhere with real-time detection and ongoing monitoring of online and mobile transactions for merchants and payment service providers. Real-time fraud management can maintain checkout conversion rates to protect revenues and enable genuine customers by tailoring according to product, sector, channel and geography.

In addition, real-time fraud management helps reduce false positives and increase fraud detection accuracy. Positive profiling techniques enable merchants to make better informed and faster decisions using advanced machine learning and profiling models, global fraud intelligence, advanced analytics and support from expert risk analysts.

Read how Westpac became more proactive in fraud management with ACI.  

Improve customer service and prevent fraud with ACI Fraud Management. Learn more.

Head of Payments Intelligence & Risk Solutions

Cleber Martins joined ACI Worldwide in 2001 and has 20 years of experience in implementing industry-leading enterprise fraud prevention solutions and anti-money laundering strategies. Cleber’s enthusiasm for driving innovation in fraud prevention stems from the pride he takes in protecting both his banking customers, and the people and communities they serve. Throughout his career Cleber has been at the forefront of the evolution of machine learning: from a focus on inputting human experience into machines, to its modern form that empowers fraud experts to combine their real intelligence with AI. Cleber calls this trend toward business users wielding new models, the democratization of machine learning. Cleber’s key areas of expertise include helping payments leaders to develop multi-faceted fraud prevention strategies that combat modern threats, as well as creating actionable intelligence in payments data, and the evolution of fraud prevention into a Customer Experience differentiator for organizations.

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